Correlation Between SM Investments and Lifevantage

Can any of the company-specific risk be diversified away by investing in both SM Investments and Lifevantage at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SM Investments and Lifevantage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SM Investments and Lifevantage, you can compare the effects of market volatilities on SM Investments and Lifevantage and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SM Investments with a short position of Lifevantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Lifevantage.

Diversification Opportunities for SM Investments and Lifevantage

0.49

Correlation Coefficient

SM Investments  Lifevantage

Very weak diversification

The 3 months correlation between SVTMF and Lifevantage is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage and SM Investments is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SM Investments are associated (or correlated) with Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of SM Investments i.e., SM Investments and Lifevantage go up and down completely randomly.

Pair Corralation between SM Investments and Lifevantage

Assuming the 90 days horizon SM Investments is expected to generate 5.82 times less return on investment than Lifevantage. But when comparing it to its historical volatility, SM Investments is 2.55 times less risky than Lifevantage. It trades about 0.07 of its potential returns per unit of risk. Lifevantage is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,428  in Lifevantage on October 10, 2024 and sell it today you would earn a total of  217.00  from holding Lifevantage or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SM Investments  vs.  Lifevantage

SM Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SM Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Lifevantage

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SM Investments and Lifevantage

The main advantage of trading using opposite SM Investments and Lifevantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Lifevantage can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lifevantage will offset losses from the drop in Lifevantage's long position.

The idea behind SM Investments and Lifevantage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.